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The development of the industry’s first fully probabilistic model for extreme liability events represents a breakthrough for risk modelling and the use of such models will eventually become common practice in the risk transfer sector, Robin Wilkinson, vice president and managing director of casualty analytics at AIR Worldwide, tells Intelligent Insurer.

Scenario-based casualty risk modelling can be used to calculate the commercial liability losses from extreme events, such as mass shootings, and in a variety of venues. Such recent events include the Parkland school shooting, the MGM Grand Hotel Las Vegas massacre, the 2016 Bastille Day attacks in France, and the 2013 Boston Marathon bombings. Most scenarios impact more than one insurance line.

The catastrophe modelling firm AIR Worldwide collaborated with RenaissanceRe as part of a joint effort to enhance the industry’s modelling of long-tail casualty risk. As part of the collaboration, AIR is producing portfolio-specific casualty losses based on its exposure management application, Arium.

Arium’s scenario-based loss assessment framework enables companies to systematically measure portfolio loss potential and exposures to simulated scenarios representing both emerging risks and forward-projected historical events. AIR and RenaissanceRe say they will work closely to further refine the industry’s first fully probabilistic model for extreme liability events.